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Originally Posted by Cimarron29414
Generally, I support a fair tax rate - somewhere around 12% to 14%, but it really needs to be the number that allows a reasonably sized government to operate. It seems it would be rather easy to calculate: Federal budget as a percentage of the nation's gross earnings(I think I have that right).
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I read today that the average overall tax burden in the U.S. since 1950 is 12%. And this is interesting to me because I took a peek at countries who use a flat-tax system (a bunch of them are in Eastern Europe), and the rates I generally saw were between 24% and 40%, quite a bit higher than 12%. I'm not sure what to make of that at this point.
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I'm certain many of you have reviewed the Fair Tax philosophy and have objections to it. I'd be curious to hear those. The only one that I can think of is that 12% to a person making $19,000 is $2280. That would be money they don't currently pay to the government in income tax - and it would be a tough pill. However, that very vocal objection would hold Washington in check for responsible budgeting.
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The immediate objection I have is the shock this would have on the American economy. Going from the current tax system to this 12% for everyone means, generally:
- Poor/underemployed/underpaid workers will lose more of their income;
- Rich/top paid/professional workers will retain more of their income;
- The poor will become more needy in terms of basic necessities, and thus will create pressure on government for social support;
- The increased demand for social support will mean an increased demand for government spending;
- The poor will have less disposable income than ever, which will be bad for the overall economy;
- The wealthy will keep more of their income and will likely invest much of it, but it's not guaranteed the investments will remain in the American economy;
- The scaling of economics means that the tax burden on the poor would be a greater overall economic burden than the tax burden on the rich, despite the flat 12%: $2,280 in taxes paid could be equal to two months' rent, whereas the wealthy would merely keep more of their money than in the past. Consider the concepts of % of income spent on food, shelter, clothing, etc.
- This proposal of a "Fair Tax" would, overall, be a recipe for making the rich richer and the poor poorer.
I'm just brainstorming here. But generally there is a difference in my mind between what's "fair" and what's bearable. And it could be argued that many of those earning less than $20,000 are students, transient workers, or aren't the head of the household, but the fact remains that many in the lower tax brackets would end up with the shock of having less money in their pockets when they didn't have that much to begin with.
I'm not a tax expert or anything, but doesn't the progressive tax system work in way that means everyone pays the same rate for the first $20,000 they make, and the same rate for the next $20,000 (or whatever the bracket is), etc.? Isn't that fair enough in that the guy who makes $250,000 paid the same rate for his first $20,000 as the guy who only made $20,000 the whole year? (Assuming I'm correct about how this works; please someone correct me if I'm wrong.)